Stockland, Mirvac push for tax reform to boost new home building

Another key concern raised by major property developer and fund manager Dexus, whose interests range from office towers to healthcare real estate and student accommodation, is construction productivity, which has fallen to less than 2.5 days of work per week on some sites, it said.

In the housing sector, taxes and other imposts are dragging on the cost of new home builds. In Sydney, about 50 per cent of the cost of a land subdivision comes from government charges of some kind, according to Mirvac, while in Melbourne, those account for about 34 per cent of the cost of an apartment. These costs mean tax reform must be part of the reform package as well, Stockland and Mirvac said.

“We would like to see reform of the state planning systems, which remain the biggest barrier to improving delivery timeframes,” Stockland CEO Tarun Gupta told The Australian Financial Review.

“To create greater certainty of investment, we need to resolve the significant backlog of federal government housing environmental approvals, and as a capital intensive sector, a review of state and national tax and investment settings would provide a boost to foreign institutional investment.”

While Prime Minister Anthony Albanese earlier this month ruled out any new tax changes before the next federal election in an effort to dampen speculation about possible changes coming out of the three-day productivity summit that starts on Tuesday, reforms remain crucial for many companies charged with delivering the homes needed in Australia.

Housing minister Clare O’Neil told the Financial Review the government would slow the pace of updates to the National Construction Code to make it easier for the industry to invest in and plan around new technology.

Mirvac CEO Campbell Hanan told the Financial Review there was a “very high regulatory burden on housing” after delivering the company’s annual results on Friday.

“Whether that’s from the environmental approvals approach with the [Environment Protection and Biodiversity Conservation Act], whether it’s planning, there is just a myriad of things that happen,” he said.

Hanan added the federal government had already improved the financial incentives to encourage housing development by cutting the withholding tax foreign investors paid on build-to-rent investments from 30 per cent to 15 per cent. That put the asset class on par with others such as student housing and hotels, he said.

ASIC’s review of the disclosure of stamp duty fees institutional investors pay for property investments, which are treated as transaction costs and appear more expensive relative to infrastructure assets, would remove another impost restricting housing development, he said.

Hanan said Mirvac would be an “obvious beneficiary” if the review led to changes in the fee disclosure rules.

The federal government has also recognised the benefits that could flow from that simple fiscal policy change.

“The decision by ASIC to review this rule is a hugely positive move that could help us unlock billions of investment, and build 35,000 additional homes for Australians,” O’Neil said last week.

Mirvac’s Hanan and Stockland’s Gupta both said work was needed to develop a more productive and skilled building workforce, even if it meant overturning current policy to welcome more migrant workers with construction skills.

“Addressing the skills shortage in building and construction would also ease the handbrake on production pipelines,” Gupta said.

“Skilled migration that would support construction we think is still really important,” Hanan said.

Dexus CEO Ross agreed, pointing to the deterioration in productivity across the construction sector. While the broader economy has improved 49 per cent over 30 years, labour productivity in dwelling construction has decreased 12 per cent, while dwellings completed per hour worked has dropped a sizeable 53 per cent, he said.

“In some states, workers get 26 rostered days off a year plus leave entitlements. Adding other unforeseen disruptions, the productivity on some sites is less than 2.5 days per week,” he told the Financial Review.

“We are paying premium wages for part-time productivity and wondering why we’re one of the most expensive places in the world to build.